Industrias Peñoleshttp://so-l.ru/tags/show/industrias_pe_oles
Tue, 20 Mar 2018 05:15:31 +0300
After enjoying a short-term spike in the wake of the gruesome Paris terror attack last Friday, spot silver prices fell again to its three-month low this week and are currently down more than 9% year to date and below the one-year high by 22% (read: Will the Rebound in Gold Mining ETFs Post Paris Attack Last?).

Therefore, it remains a matter of debate whether silver prices are really crashing or have already reached their bottom. There are a number of factors which indicate that silver prices will indeed rebound and that too even strongly.

First, although there is a strong chance of an interest rate rise, the most recent Federal Open Market Committee (“FOMC”) meeting hinted that the hike will be soft. This has led to a pullback in the U.S. dollar and again brightened the prospect of precious metals as an investment asset.

Second, recent growth forecasts suggested that the global economic slowdown is more pronounced than expected. Recently, the Organization for Economic Co-operation and Development (“OECD”) cut its 2015 global growth forecast to 2.9% from 3% expected earlier. The sluggish growth will largely be due to China, which is projected to grow by 6.8% in 2015, its lowest in 25 years.

Precious metals like gold and silver are considered as an excellent economic hedge during a prolonged period of economic downturn, as investors prefer them over riskier assets such as stocks. The present slide in silver prices also presents a good buying opportunity.

Finally, since silver is used in a number of key industrial applications, China’s economic slowdown is expected to hurt its demand. However, the white metal is expected to draw leverage from its use as the best metallic conductor in solar panels.

About 3 million ounces of silver are required to generate one gigawatt of electricity from solar energy. Increasing government efforts to curb carbon dioxide emissions are boosting the demand for solar panels across the world. Most of the demand is likely to come from China, which is expected to become the world’s largest installer of solar panels this year.

ETFs in Focus

Despite the white metal hitting a three-year low price this week, silver mining ETFs rebounded in the last five days (as of November 19, 2015). Investors should closely monitor the movement of these ETFs as the rally is expected to continue in the coming days (see all Materials ETFs here).

This ETF follows the price and yield performance of the Solactive Global Silver Miners Index, measuring the performance of the silver mining industry. The fund holds 25 stocks in its basket. Industrias Penoles Cp, Silver Wheaton Corp. (SLW) and Tahoe Resources Inc. (TAHO) are the top three holdings in the fund with allocations of 11.59%, 11.17% and 11.08%, respectively.

The top 10 holdings account for 74.24% of the fund’s assets. The ETF is also highly focused on Canadian firms with a 57.96% share, followed by U.S. (12.34%) and Mexico (11.15%). SIL has gathered about $131 million in assets and trades in an average volume of roughly 78,000 shares per day. It charges 65 bps in fees from investors per year. The product lost 29.7% so far this year but was up 4.4% in the past five days (read: Precious Metal Mining ETFs Head to Head: GDX vs. SIL).

This ETF tracks the price and yield performance of the MSCI ACWI Select Silver Miners Investable Market Index, which provides exposure to companies primarily engaged in the business of silver mining in both developed and emerging markets. The fund holds 30 stocks in its basket. Canadian firms dominate the fund’s portfolio with a 59.49% share, followed by U.K. (13.52%) and the U.S. (9.58%).

Silver Wheaton, Fresnillo Plc (FNLPF) and Industrias Peñoles occupy the top three positions in the basket with shares of 23.52%, 10.93% and 7.54%, respectively. The top 10 holdings comprise 71.4% of the fund. Notably, the fund also offers some exposure to the broader precious metals and minerals sector (29.72%) and gold (9.23%), apart from silver (60.84%).

The product has amassed over $12 million in its asset base and trades in a paltry volume of around 17,000 shares a day. It charges investors 39 bps in fees per year. The fund shed 32.1% in the year-to-date timeframe but returned 2.9% in the last five days (read: Silver Mining ETFs Head to Head: SLVP vs. SIL).

Consumer price index (“CPI”) in China rose 1.6% year over year in September, lower than the August gain of 2%. The producer price index (“PPI”) declined 5.9% in the same month after falling by the same magnitude in the previous month. With this, it recorded its 43rd straight month of decline. On the other hand, U.S. retail sales gain of 0.1% in September was lower than expected (0.2%) while producer price index was the lowest since January at 0.5% in the same month, after remaining unchanged in August.

Further, International Energy Agency (“IEA”) recently predicted that the global oil market will remain oversupplied in 2016 due to the surge in Iranian oil supply following a nuclear deal and weak global demand. This will continue to put pressure on oil prices and result in subdued inflation across the world due to lower oil consumption bill.

All these data dimmed the prospect of an interest rate hike by the Fed, at least in 2015, leading people to flock toward non-yielding assets such as gold and silver. The chance of a delay in rate hike also led the U.S. dollar to tumble to its lowest level since late August against a basket of major currencies. This has further strengthened the demand for gold and silver in the global market as a weaker dollar makes them cheaper for holders of other currencies. As a result, both gold and silver hit their three-and-a-half-month highs recently (read: What is in Store for Industrial Metal ETFs After China Rout?).

Amid the bullish price trend for silver, it would be intriguing to look at two top performing silver mining ETFs and their key differences (see all Materials ETFs here).

This ETF tracks the price and yield performance of the MSCI ACWI Select Silver Miners Investable Market Index, which provides exposure to companies primarily engaged in the business of silver mining in both developed and emerging markets. The fund holds 30 stocks in its basket. Canadian firms dominate the fund’s portfolio with a 59.08% share, followed by U.K. (12.44%) and the U.S. (9.99%).

Silver Wheaton Corp. (SLW), Fresnillo Plc (FNLPF) and Industrias Peñoles occupy the top three positions in the basket with shares of 21.96%, 10.02% and 8.04%, respectively. The top 10 holdings comprise 71.42% of the fund. Notably, the fund has some exposure to the broader precious metals and minerals sector (29.18%) and gold (10.26%), apart from silver (60.49%).

The product has amassed over $13.5 billion in its asset base and trades in a paltry volume of around 15,000 shares a day. It charges investors 39 bps in fees per year and has a dividend yield of 2.87% (as of October 14, 2015). The fund returned 23.6% in the past one month.

This ETF follows the price and yield performance of the Solactive Global Silver Miners Index, measuring the performance of the silver mining industry. The fund holds 24 stocks in its basket. Industrias Penoles Cp, Silver Wheaton Corp. and Silver Standard Resources Inc. (SSRI) are the top three holdings of the fund with allocations of 11.19%, 10.11% and 7.52%, respectively.

The top 10 holdings account for 65.76% of the fund’s assets. The ETF is also highly focused on Canadian firms with a 57.96% share, followed by the U.S. (12.34%) and Mexico (11.15%).

SIL has gathered about $154 million in assets and trades in an average volume of more than 238,000 shares. It charges 65 bps in fees from investors per year and offers a dividend yield of only 0.09%. The product was up 25.4% over the last one month (read: Precious Metal Mining ETFs Head to Head: GDX vs. SIL).

Comparison

Exposure: In terms of company and country exposures, both funds stand on the same foot. However, SLVP has an edge over SIL as the former is also exposed to gold and the broader precious metal and minerals mining sector.

Concentration: SLVP holds more securities than SIL and is more concentrated in its top 10 holdings.

Volume: The higher volume of SIL compared to SLVP suggests that the former is much more liquid and its bid/ask spread should be relatively tighter than the other.

Cost and Yield: SLVP is cheaper than SIL and has a much higher dividend yield.

Therefore, investors keen or riding the bullish trend in silver prices should take note of these points before choosing between the two popular silver mining ETFs.